February 9, 2014:   As Chinese ships and aircraft continue to fly close to Japanese territory or, in the case of the disputed Senkaku Islands, within Japanese territory, Japan has accused China of repeating the errors committed by the European nations that led to World War I (1914-18). China continues to demand payback for the damage Japan did to China during World War II and that is increasing the risk of fighting, or even war, between the two nations. Meanwhile the Filipino and Chinese government are embroiled in a very public spat over Filipino accusations that China is behaving like the Nazis did before World War II, when Germany claimed ownership of all of Austria plus parts of France, Poland and Czechoslovakia as part of “Greater Germany.” German aggression in pursuit of these claims, along with similar Japanese claims in East Asia, triggered World War II. China publically called this comparison amateurish, ignorant, lame, inconceivable, unreasonable and inaccurate. Unlike the Nazi and Japanese claims, China insists its assertion that it owns all the South China Sea, including reefs and islands less than a hundred kilometers from the Philippines (and over a thousand kilometers from China) are fair, reasonable and just. China has similar claims on areas close to Brunei, Malaysia, Vietnam and Taiwan. China also claims all of Taiwan and some Chinese officials are suggesting that a case can be made for all or part of the Philippines being part of “Greater China.” The Philippines is calling on the world to help contain China and not let this turn into another trigger for a major war. The U.S. recently reminded everyone that America is treaty bound to intervene if its allies Japan, the Philippines and South Korea suffer from Chinese attack. Despite all this China believes their claims merely seek to restore Chinese territory that was taken during two centuries of foreign aggression.

But there’s something else going on here. All this flag waving and saber rattling is a classic ploy used by authoritarian governments facing public unrest at home. By creating all these tensions with the neighbors (and the United States) China leads many Chinese to think less about corruption and government mismanagement within China and more about external threats the government will protect everyone from. While many Chinese realize they are being played by their own government, most Chinese agree with the idea that it’s time for China to get payback and for traditional Chinese domination of the region to be restored. This is what Japan is recognizing, as one of the major causes of World War I was the recently united and economically strong Germany demanding more respect within Europe and, as the Germans liked to put it, their “place in the sun.” That desire led to over thirty years of wars and over 100 million dead. The conflict triggered by German demands for a place in the sun did not fade until the end of the Cold War in 1991. As an ancient bit of advice puts it; “be careful of what you ask for, you might get it.”

American military leaders started the year by warning that the Chinese armed forces are rapidly modernizing. While true, this was largely self-serving and meant mainly to scare the voters and Congress into giving the Department of Defense more money. What was not mentioned was that the Chinese are still playing catchup and have a long way to go. Nevertheless the Chinese buildup is impressive. For example, in January 2014 China put two of its new Type 056 corvettes into service. That followed the commissioning of eight 056s in 2013. The first 056 entered service in February 2013 and twenty are being built in four shipyards. All will be in service by 2015. These 1,400 ton ships appear to be playing a crucial role in Chinese efforts to seize control of the South China Sea. China has also exported the 056 to Thailand (as a specialized coastal patrol ship) and Bangladesh (as a more heavily armed “frigate”). China is also rapidly building more submarines, destroyers, frigates, amphibious ships and another carrier. Cold War era ships and aircraft are being rapidly retired and replaced with new designs. But what is not publicized is how all this looks from the Chinese side.

To the Chinese the U.S. fleet is still larger, even with half the American fleet assigned elsewhere most of the time. The U.S. fleet has been shrinking since the 1970s but has continued to improve its technology. Moreover the U.S. has allies in the area (Japanese and South Korea in particular) that have American style (modern and well trained) ships and crews. China still has a long way to go when it comes to training and the capabilities of many of their weapons are suspect, if only because they are largely untried in combat. China continues to upgrade its ships and aircraft and spend more money getting the ships to sea for training. China does have one really huge problem and that is with their military traditions. These ancient habits involve a lot of corrupt officers and a tendency to cut corners and be more concerned with appearances than reality. Chinese leaders are aware of this, but are finding that these old ways are remarkably resistant to reform. Thus the Chinese armed forces look better to outsiders than they actually are. That is on purpose, but the Chinese leadership knows betters, as do many of the potential opponents.

Despite the growing tensions between the Chinese and North Korean governments, economic ties continue to grow. In 2013 some 93,300 North Koreas received work visas from China. This is up 17 percent over 2012. Last year a record 206,600 North Koreans legally visited China as tourists, which is up 11 percent over the previous year. Given the level of paranoia in the North Korean leadership, stats like this have another, more sinister, meaning. North Korea sees any contact with foreigners as potentially polluting and likely to make North Koreans less loyal. Despite the paranoia Chinese businessmen are optimistic about more investments in North Korea.

Taiwan, like many other nations during the last two decades, is finding that moving from conscription to an all-volunteer military is not easy. Because of recruiting problems Taiwan is again cutting the number of military personnel it has on active duty. Now it will reduce its military personnel from 215,000 to 170,000 over the next five years. The official reason is better relations with China makes reductions possible, but another reason is the inability to attract sufficient volunteers. This is not a new problem and the government has been trying to deal with it for over a decade. Until recently the solution was to reduce armed forces strength from 350,000 in 2003 to 215,000 by 2014. At that point the military was supposed to be all volunteer. But the plan has not worked because the military has not been able to attract enough volunteers. Solving that will cost more money and a change in attitude within the military.

China also has problems with popular sentiments that contradict official policy. Case in point is the growing anger over pollution. This is the result of three decades of rapid economic growth and a culture of corruption that allowed the pollution to grow and the government to keep it out of the news. But eventually people noticed and have been increasingly open and direct in demanding some action to deal with it. So the government responded recently in a way no one expected; pollution data was declared public data and all government organizations and businesses were ordered to make their pollution data public. Not everyone will comply but given the growing boldness of angry citizens and availability of pollution monitoring equipment, any cheaters are vulnerable to getting caught and then exposed to a public shaming on the Internet. For commercial firms this can mean lost business. For government officials this can mean more scrutiny that corrupt bureaucrats are comfortable with. With this new openness policy the government is making itself less unpopular and harnessing the power of the anti-pollution groups (who represent most of the population) for a joint effort in dealing with the dirty air and water.

Senior Chinese leaders are becoming increasingly bold in dealing with popular discontent, aware that throughout Chinese history such discontent often led to popular uprisings that brought down dynasties and made life very unpleasant for those in charge. Many of the lower ranking bureaucrats are less concerned with this as they are more interested in stealing as much as they can while they have the opportunities. But if decisions at the top can make this more difficult to do, then there will be less corruption and bad behavior by officials. The most senior people are making moves like this because they understand that they do not “rule” China as much as they preside over a huge bureaucracy which resists unpopular orders and is more responsive when the senior leadership makes decisions that simply put more pressure on bureaucrats to behave.

The international financial community is getting nervous about the Chinese government’s ability to deal with a uniquely Chinese financial bubble. While in the West the usual bubble is one based on real estate or stock market speculation, in China there is a less well known bubble involving an unofficial banking system that provided loans to highly speculative (and often, by Chinese standards, illegal) undertakings. These “shadow banks” were also very corrupt, doling out bribes and fees to corrupt businesspeople and government officials. The problem is that all this off-the-books financial mischief has got its hooks into legitimate assets (as collateral or a source of cash to keep operating or expand). The number of bad loans (that are not, and probably never will be repaid) has been growing and that is threatening to reduce the cash the official banks have free to keep the economy going. If the government mishandles this mess the Chinese economy could suffer widespread bankruptcies and high unemployment. It could take several years to recover and during that time there could be a popular uprising. A dip in the Chinese economy (at $8 trillion second only to the American $14 trillion) would ripple throughout the global economy. It would be 2008 all over again, but possibly worse. So it’s not just China’s problem.

January 30, 2014: China and India has agreed to hold another high-level meeting to discuss their border disputes. This would be the 17^th such meeting and it will be held February 10^th. The border is 4,057 kilometers long and China claims much territory that is now considered part of India. China has become less vocal about its claims on Indian territory recently but has not abandoned these assertions. The Chinese troops, when confronted by Indian soldiers or border guard will claim they are really in Chinese territory, but back off rather than open fire over the issue. This is a big relief to India, which has a defense budget one third that of China’s.

January 29, 2014: Three Chinese warships (an amphibious ship and two destroyers) entered the Indian Ocean and conducted five days of training exercises before returning to the Pacific.

January 27, 2014: Off one of the Senkaku Islands three Chinese warships entered Japanese territorial waters (within 22 kilometers from shore) for two hours. This is the second such incident this month. China claims ownership of the Senkanus even through Japan has occupied them for over a century. There was also a similar intrusion on December 29^th.

Taiwan is now building its own smart bombs. Recently a Taiwanese version of the U.S. JSOW-ER entered service and was shown mounted under the wing of a Taiwanese jet fighter. Taiwan tried to buy JSOW from 2006 to 2009 but the U.S., bullied and manipulated by China, refused to sell. The Americans said they did not want to sell Taiwan aircraft weapons that could be used to attack China. In particular, this meant no radar homing (AGM-88C HARM) missiles and JDAM smart bombs. To get around this policy Taiwan began developing its own smart bombs, particularly something similar to the American JSOW (Joint Stand Off Weapon) Also called the AGM-154A, the Taiwanese version is called the Wan Chien. Taiwan also went ahead and built its own version of JDAM.

January 24, 2014: In the northwest (Xinjiang) up to twenty Uighurs set off bombs in a beauty salon and a marketplace. Police responded and twelve Uighurs were killed and five arrested. In northwestern China the local Uighurs are increasing angry over growing pressure from Han Chinese soldiers and intrusive Han government officials. Because of that many Uighurs continue to support anti-Han activity and this makes it possible for Islamic terrorists to survive and operate. Most Uighurs are found in Xinjiang province. There the nine million Uighurs are now less than half the population and most of the rest are Han Chinese. Chinese officials have been publicly urging soldiers and police to be more aggressive against uncooperative Uighurs. The government accuses Uighur activists of endangering state security and tries to keep the unrest out of the news. This is part of an ongoing effort to suppress Uighur unhappiness in the face of the growing number of Han Chinese moving to traditionally Uighur areas and taking over the economy and most of the good jobs. The same thing is happening in Tibet, where the government is using the same tools to keep everyone under control.

January 22, 2014: Chinese aircraft are now the most common threat Japanese air defense forces have to deal with. In 2013 Japanese aircraft went up over 300 times to confront Chinese aircraft (often recon aircraft) coming too close to Japanese air space. Thus 2013 was the first year Chinese intrusions exceeded Russian ones. This has been coming for several years. In 2011 nearly 43 percent of the sorties were for Chinese aircraft. That's almost three times as many Chinese intrusions as in 2010. Meanwhile Russian intrusions have been declining. In 2011, Russia still accounted for 52 percent of the intrusions. For the last three months of 2013 Japanese jet fighters scrambled 138 times to confront approaching Chinese warplanes. In those three months Russia only accounted for 110 incidents.

China now has 380 peacekeepers to Mali.